In spite of a rosy forecast for economic growth of 4 to 5% for South
Africa over the next five years, house-price growth is unlikely to even
beat consumer inflation, says Erwin Rode of property economists and
valuers Rode & Associates.

Estate agents are increasingly reporting dramatic decreases in show
house attendance, longer selling periods, resulting in lower offers,
and falling sales - all indications of an easing in demand.

Rode says the drop-off in demand comes as no surprise. "The growth
of residential property prices to record levels over the past two years
has now made it unaffordable for most first-time buyers to acquire their
own homes as salaries have only increased by about 7% p.a. over the
same period."

Rode says national data analysed on a quarterly basis in Rode's Report,
supports the fact that the residential market is entering a levelling-off
period. The Rode team expects the housing market to continue losing
steam and foresees much lower house-price growth for next year.

"We are entering the downswing stage of the real residential property
cycle; hence we expect the bargaining power of buyers to continue strengthening
relative to that of sellers for the next few years."

Data released by Absa earlier this year gave the average house price
in South Africa at R678 000, which would mean a family's joint income
would have to exceed R20 000 per month to be able to obtain a 90% bond
for such a purchase. "Those who could stretch their gearing to
that extent have done so. Clearly these kinds of house-price levels
could not have continued as they are out of reach of the average person."

The Atlantic seaboard in Cape Town is one of the areas leading the
fall-off in demand with June house price sales reported by ReMax Living
Atlantic to be down 33% on the June sales a year ago.

Realty1Elk CEO Mike Bester confirms that the group?s franchisees are
experiencing the same trend in high-priced areas like the Atlantic seaboard
and Tygerberg and surroundings, with drops in show-house attendance
of as much as 70%.

According to FNB's latest Residential Property Barometer, the number
of sellers countrywide who failed to realise their asking price has
risen from 29% in the first quarter of 2005 to 44% in the second quarter,
which suggests that the shifting of the balance of power towards buyers
is a national phenomenon.

International real estate data supplied to ResearchWorld.com by S&P/Citigroup
BMI Property Indices also reveals an international cooling-down in property
price increases, with only 1,2% growth for the first half of 2005. From
topping the gains list with 33% property price growth last year, South
Africa has come down to 11th place overall with price gains of 12,7%
over the first half of 2005. Cees Bruggemans, chief economist of FNB,
says potential home-buyers in SA would do well to remember that the
international cycle of house-price increases was led by Australia, followed
by Britain and then the US. Over the past 12 months, house-price levels
in Sydney have been declining steadily and in London they are already
down by between 2% and 5% this year, after having more than doubled
in recent years.

Whereas there was still some growth in US housing prices, it was only
a matter of time before bond-linked costs start to increase and undermine
sentiment. Rode says in the new global macro-economic environment, a
moderate correlation has become evident between movements in the local
and foreign residential property markets. The common denominator is
economic growth.

"However, economic growth isn't the only driver of house prices
- affordability also plays a role."